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Author: 



Chandler, William Eaton 



Title: 



The railroad rate question 



Place: 

[n.p.] 

Date: 

[1906] 



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Chandler, William Ejit'on, 1835-1917. 
The railroad rate question. ulSOSj 
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THE RAILROAD RATE QUESTION 



BY WM. R CHANDLER. 



Shall the taxes upon the people for 
passenger and freight transportation be 
as high as the railroads choose to make 
them; unlimited In any way by the 
government? 

Vast Size ol the Railroads of America. 

The figures of this stupendous rail- 
road taxation of the American people 
are startling. They are every year 2,- 
000 millions of dollars ($2,000,000,000) for 
passenger and freight transportation 
over 210,000 miles of track. The rail- 
roads are worth about 8.000 millions of 
dollars, but are capitalized in bonds and 
stock amounting to 14,000 millions of 
dollars upon which the railroad mana- 
gers are seeking to collect 6 per cent 
annual income or 840 millions of dollars. 
These railroad taxes upon the people 
are $25 a year upon every man, woman 
and child in the country, or $125 a year 
upon every family of five members. 

Necessity of Some Supervisory Control 
of Rates of Fares aud Freights. 

The greatest question of all now be- 
fore the people and the congress of the 
United States is whether the railroads 
in raising 2,000 millions of dollars an- 
nually shall have no limitations put up- 
on them as to the rates for fares 
and freights which they may charge in 
order to collect that sum and to so in- 
crease it that the 840 millions may be 
given to their bond holders and stock- 
holders after paying operating expenses 

IiiterHtatc Commerce Act of 1887 Sup- 
posed to Give Power to Commis- 
sion Till Courtb Destroyed It. 

The danger of leaving such a fearful 
power in the uncontrolled hands of the 
railroad managers, especially after 
competition had begun to cease to ex- 
ist under modern conditions, became so 
evident prior to the yeai ,1887 that con- 



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gress passed an act creating an Inter- 
state Commerce commission and au- 
thorizing it to hear complaints of op- 
pressive rates and to decide upon the 
justice thereof. It was for several 
years supposed that the commission, 
having found a rate to be unreasonable, 
could fix a rate to take its place. But 
after ten years the supreme court de- 
cided that such power did not exist, 
and this decision left the commission 
powerless to give a remedy for un- 
just railroad rates. Efforts hitherto 
made to Induce congress to amend the 
law and give the necessary remedial 
power to the commission have been de- 
feated by the railroads. President 
Roosevelt has now taken up the con- 
test for the passage of suitable laws; 
this has become the all important sub- 
ject; and the question is shall the pres- 
ident or the railroads be sustained by 
congress? 

The Railroads Opposed to Any Con- 
trol Whatever. 

Many words have been expended up- 
on the subject now being considered; 
most of all by the railroad advocates. 
Their general position is that there is 
no need of any governmental control 
of rates; that the railroad managers 
can be safely trusted to fix ail rates, 
and will not make them unreasonably 
high. But seeing an overwhelming pre- 
ponderance of opinion that there must 
be some governmental control exercised, 
they devote themselves to making the 
method of such control as petty and 
ineffective as they possibly can. 

President Roosevelt's Plan for Control 
a Good One. 

• 

The president and his supporters say 
that the simplest and best method is to 
supply the defect in the original law of 
1887 and let the Interstate Commerce 






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commission hear a complaint against 
a given rate and if they find it too 
high, name and fix a new rate to take 
its place and put it into immediate 
operation. The expense of the hearing 
on this complaint the shipper or other 
complainant must bear. If he suc- 
ceeds and the railroads make further 
contest against the new rate in the 
courts the government, through its at- 
torney general, must defend it. If the 
new rate proves to be so unreasonably 
low as to reach, according to the judi- 
cial judgment of the court, to a prac- 
tical confiscation of the property of 
the railroad, the court's decision will 
cverule the order of the commission. 
A reader or student new to this sub- 
ject will naturally say tc all this: Why 
not, all this is reasonable, how can any 
railroad justly object to such a method 
of protecting the public and the rail- 
roads alike? Looking further, how- 
ever, he will soon see that the rail- 
roads do make many objections; and 
continuing his inquiry, he will ascertain 
their absurdity or at least their lack 
of just foundation. 



A Court Cannot Pos^^ibly Make Rates. 

Assuming that some remedy is to be 
given for unreasonably high charges, 
the railroads say it must be given by 
a court which shall try each case and 
render a judgment thereon. They are 
willing to allow the commission to in- 
vestigate the complaint and express its 
opinion thereon and pass it over to a 
court for final action, but they are not 
willing that the commission shall make 
any binding decision. 

The conclusive answer to this plan 
for court action is that the courts never 
will give a remedy against a rate 
which although it may seem unreason- 
ably high to them, they cannot be 
sure is so high as to be extortionate 
in its effect. The reason why the 
courts will not make a mere decision 
that a rate seems to them to be un- 
reasonable is because the question is 
not a judicial one, it is only a common 
sense question and does not involv^e 
any question of law which the courts 
can take hold of unless the rate is so 
clearly and grossly extortionate as to 



compel it to do so in the exercise cf a 
high judicial function. 

This distinction between a legislative 
or administrative or executive func- 
tion which can be performed by the 
Interstate Commerce commission and 
not by a court, and a judicial function 
which can be performed by the court 
and not by a commission, may not seem 
fundamental to persons not lawy<;rs, 
but to lawyers it is clear and con- 
trolling. A commission using adminis- 
trative powers will give relief to op- 
pressed shippers; a court with the 
usual judicial power only will not do 
it. All lawyers, including the railrctad 
lawyers, know this and thai the rail- 
road plan for protecting the people 
will prove worthless. That is the reiil- 
roads' desire and purpose. 

n. 

For the Commission to Fix Kemedial 
Rates Is Not Difhciilt. 

This main ccntention of the railroads 
being unjust, their other objections are 
feeble. 

They say that rate making is so com- 
plicated and difficult that a commis- 
sion cannot make rates. Answer: It 
is not intended that they shall make 
original rates. The railroads will con- 
tinue to do that. But a commission 
can investigate a single grievance and 
give a remedy. A physician cannot 
make a whole man; but he can find out 
what ails a sick man and supply re- 
lief! And if a commission cannot 
make rates, how can a court make 
them? 

III. 

The Hages ol Railroad Employees 
Will JSot Be Reduced. • 

They say that there is danger that 
with control by the Interstate Con^i- 
merce commission there will come such 
reduced receipts that the wages (»f 
railroad employees must be reduced. 
Answer: There is no doubt that the 
commission will care quite as much for 
the wages of the men as the railroad 
managers wili. If, to give the public 
reasonable protection, rates ought to be 
reduced, the managers can guard their 
workmen, by better management oi 



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their own part and by a reduction of 
their enormous and sometimes atroci- 
ous salaries. Are we to have in this 
(ountry huge aggregations of capital 
and vast labor unions, fighting each 
other some of the time and at other 
times all combining against the con- 
sumers? If so, the consumers ought 
to establish their unions to protect 
themselves against confederated capi- 
talists and laborers. If competition in 
all the great products is to continue t'> 
disappear, the industrial world will or- 
ganize itself into capitalistp' unions, 
labor-unions and consumers'-unions, 
and equality of protection through 
combination will be secured to all 
classes of society. 

Meantime workmen ought to hesitate 
before they help their employers to 
plunder the consumers of joint pro- 
ducts of labor and capital. 

IV. 

Remedying Extortionate Rates is Not 

an Unjust Interference With 

Property Rights. 

They say that to interfere with rail- 
road rates is an invasion of the rights 
of property, that the railroads are 
owned by their stockholders and bond- 
holders, who ought to be as free as 
the owners of all other property to 
charge all they can get for its use. 

Answer: Railroads are not private 
property, the owners of which are en- 
titled to all the perfect and complete 
rights of other property owners. They 
have been allowed to take land against 
the will of its owners and their lines 
are therefore public highways. Rea- 
sonable governmental regulation of 
fares and freights to protect the peo- 
ple from extortion is therefore fair and 
just and right. Competition protects the 
consumers of ox'dinary products; and it 
once protected the patrons of railroads. 
But now railroad competition is ended. 
The plains country is gridironed by 
railroads, and it is folly to build more; 
in any valley &lso, more than one raM- 
road is folly. Competition being ended, 
governmental controi is the only pos- 
sible protection against extortion. If 
it is not given, governmental owner- 
ship will soon follow. The people will 
never allow rates to be pushed up by 



the railroads so they can collect $840,- 
000.000 of net profits in order to pay 6 
per cent on their fourteen thousand 
millions of capitalization. The rail- 
roads of the country being taken over 
at their value of 8,000 millions, the 
United States can borrow that amount 
at 3 per cent or for 240 millions of dol- 
lars and save to the railroad patrons 
600 millions annually. 

V. 

The Commission is Not a Prosecutor 
but a Referee. 

They say that the Interstate Com- 
merce commission ought not to be al- 
lowed to be both prosecutor 
and judge, that is, to inves- 
tigate the facts and make the deci- 
sions. 

Answer: The shippers will be the 
prosecutor and the railroads the de- 
fendants; the cases of complaint will 
be tried like those before referees. 
There is no danger of harm in such 
proceedings, especially if the courts are 
permitted to restrain the commission; 
and the commission can decide the 
practical common-sense question 
whether a rate is on the whole too 
high; whereas courts cannot do this, 
but can only say as a matter of \a.\ 
that a given rate is extortionate. Com- 
mittees of congress and congress itself 
are both investigators and judges, and 
yet no harm is done. 

Street Railway Rates Are Always Con- 
trolled Against the Will of the 
Oivners. 

So the railroad objections go on to the 
end of the chapter. There is hardly 
any limit to the railroad arguments de- 
vised by able managers and lawyers 
against any let or hinderance to rail- 
road extortion; but there is not one 
argument of any weight. There are 
23,000 miles in the 987 street railroads 
of the country, capitalized at 2,300 mil- 
lions of dollars; and the rates of fares 
are inexorably fixed by the legislatures, 
and the companies have nothing what- 
ever to say at out the rates. Like con- 
trol in less arbitrary fashion is going 
to be taken by the people of their 
ilO.OOO miles of steam railroads. In ad- 
dition to railroad extortions for the pur- 



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pose of paying^ Interest on bonds and 
high dividends, the railroads have 
overtaxed the people in order to con- 
trol the political grovernment of the 
country; and by free passes, mileage 
books griven away, special contracts 
with newspapers, and direct expendi- 
tures of money, they have with the aid 
of the insurance companies and nation- 
al banks, seducei the ministers, law- 
yers, editors, and college professors and 
corrupted the caucuses, conventions 
and elections, the legislators and exe- 
cutive officers of the country until the 
whole people stand aghast at the dis- 
honor and disgrace thus brought upon 
the republican form of government. 

Radical Legislation H ill Come If Re- 
medial Laws Are Delayed. 

If the moderate measures recom- 
mended by President Roosevelt are not 
accepted by the railroads, more radical 
measures will come at last. There is 
some evidence at this time that the 
railroads intend to nominally cease op- 
position to conferring power upon the 
Interstate Commerce Commission to 
make remedial rates and to throw their 
great strength (1) in the direction of 
some limitation upon that power which 
will make it feeble and worthless, and 
(2) toward obtaining the right to the 
railroads to make pooling agrreements. 

Pooling a Monstrosity. 

There are some remarks in the mes- 
sage of the piesident which are seized 



upon as indicating a willingness on his 
part to legalize pooling. The move- 
ment to persuade him to do this In an 
attempt to hang a millstone about his 
neck and cast him into the depth;? of 
the sea. It is impossible that <Jon- 
gress will by affirmative law abcllsh 
all railroad competition, forbid any 
railroad to lower its rates without the 
consent of aH the railroads, and au- 
thorize a single railroad combination 
with a capital of fourteen billionsi of 
dollars. Thid would create a monstro- 
sity whose lawful existence would ]Dro- 
voke a popular revolution. 

The Southern Railway Company's Ex- 
cessive Capitalization, 

The 210,000 miles of railroad are di- 
vided up into systems— the larger sys- 
tems containing from 5,000 to 10,000 
miles. The Southern Railway company 
has 4,952 miles; capitalizea at 350 mil- 
lions of dollars, or $70,000 per mile. 
Its bonds are 170 millions, its stock 180 
millions. The stock is water, the road 
being worth only about $35,000 per mile 
or 175 millions. Its gross earnings are 
."^O millions, its net earnmgs 17 mil- 
lions, from which it is only able to 
spare 2 millions for divicends on its 
watered stock. Its wonderfully able 
manager is seeking to make it earn 
enough to spare 9 millions for dividends 
and does not mean to allow congress to 
interfere. What will the ppople saj'? 

Wm. E. Chandler. 
February 5th, 1906. 















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